When is a Current Account Deficit Bad?

A current account deficit is sustainable when its underlying drivers support a smooth correction in the future. It is unsustainable when symptomatic of macroeconomic imbalances that would eventually trigger disruptive adjustments. Although a curren...

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Bibliographic Details
Main Authors:	Devadas, Sharmila, Loayza, Norman
Format:	Brief
Language:	English
Published:	World Bank, Washington, DC 2018
Subjects:	CURRENT ACCOUNT TRADE IMPORTS GLOBAL VALUE CHAINS GLOBALIZATION MACROECONOMIC POLICY CURRENCY IMBALANCE
Online Access:	http://documents.worldbank.org/curated/en/507731538487989157/When-is-a-Current-Account-Deficit-Bad http://hdl.handle.net/10986/30506

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recordtype	oai_dc
spelling	okr-10986-305062021-05-25T10:54:42Z When is a Current Account Deficit Bad? Devadas, Sharmila Loayza, Norman CURRENT ACCOUNT TRADE IMPORTS GLOBAL VALUE CHAINS GLOBALIZATION MACROECONOMIC POLICY CURRENCY IMBALANCE A current account deficit is sustainable when its underlying drivers support a smooth correction in the future. It is unsustainable when symptomatic of macroeconomic imbalances that would eventually trigger disruptive adjustments. Although a current account deficit in itself is neither good nor bad, it is likely to be unsustainable and lead to harmful consequences when it is persistently large, fuels consumption rather than investment, occurs alongside excessive domestic credit growth, follows an overvalued exchange rate, or accompanies unrestrained fiscal deficits. Even though a current account deficit is often paralleled by deteriorating net foreign assets, it may not be as informative about immediate-term financial vulnerabilities as the size, maturity, and currency composition of gross financial stocks. 2018-10-04T18:28:16Z 2018-10-04T18:28:16Z 2018-10 Brief http://documents.worldbank.org/curated/en/507731538487989157/When-is-a-Current-Account-Deficit-Bad http://hdl.handle.net/10986/30506 English Research and Policy Briefs;No. 17 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Brief
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	CURRENT ACCOUNT TRADE IMPORTS GLOBAL VALUE CHAINS GLOBALIZATION MACROECONOMIC POLICY CURRENCY IMBALANCE
spellingShingle	CURRENT ACCOUNT TRADE IMPORTS GLOBAL VALUE CHAINS GLOBALIZATION MACROECONOMIC POLICY CURRENCY IMBALANCE Devadas, Sharmila Loayza, Norman When is a Current Account Deficit Bad?
relation	Research and Policy Briefs;No. 17
description	A current account deficit is sustainable when its underlying drivers support a smooth correction in the future. It is unsustainable when symptomatic of macroeconomic imbalances that would eventually trigger disruptive adjustments. Although a current account deficit in itself is neither good nor bad, it is likely to be unsustainable and lead to harmful consequences when it is persistently large, fuels consumption rather than investment, occurs alongside excessive domestic credit growth, follows an overvalued exchange rate, or accompanies unrestrained fiscal deficits. Even though a current account deficit is often paralleled by deteriorating net foreign assets, it may not be as informative about immediate-term financial vulnerabilities as the size, maturity, and currency composition of gross financial stocks.
format	Brief
author	Devadas, Sharmila Loayza, Norman
author_facet	Devadas, Sharmila Loayza, Norman
author_sort	Devadas, Sharmila
title	When is a Current Account Deficit Bad?
title_short	When is a Current Account Deficit Bad?
title_full	When is a Current Account Deficit Bad?
title_fullStr	When is a Current Account Deficit Bad?
title_full_unstemmed	When is a Current Account Deficit Bad?
title_sort	when is a current account deficit bad?
publisher	World Bank, Washington, DC
publishDate	2018
url	http://documents.worldbank.org/curated/en/507731538487989157/When-is-a-Current-Account-Deficit-Bad http://hdl.handle.net/10986/30506
_version_	1764472286589485056

When is a Current Account Deficit Bad?

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